Dear Shareholders,
Thank you for taking time to read our annual report of FY 14-15 which
comes with the theme Powering Ahead - an expression of our
operational resilience in the face of changing business conditions.
We continue to successfully stride through diverse challenges powered
by the V-Guard brand equity, governance, product innovations, strategic
initiatives and by maintaining stakeholder relations.
Performance Review
Your company, though started FY 14-15 on a buoyant note, stumbled upon
many macroeconomic challenges in the second half of the year. The
favourable consumer sentiments echoed positively on our performance
during the first two quarters of the year. During this period our
revenue as well as margins improved substantially. However during
Q3 & Q4, the initial euphoria plummeted giving way to weak consumer
sentiments, lower rural demand on inferior farm incomes and slower-than
-expected growth in construction activity. Sales of some of the key
products in our electrical segments such as housing wires, cables and
pumps were impacted, reflecting on our revenue growth as well as
margins.
Though lower than expected, our top line improved by 15% y-o-y basis as
against 12% in the previous year.
During the year under review we achieved a total revenue of Rs.1746
crores as against 1517 crores in the previous year. The growth in
revenue was propelled by increased sales from water heaters,
stabilizers, fans and kitchen appliances. Our amplified advertising and
aggressive marketing initiatives helped in increasing the revenue share
from non south markets to 33% as against 30% in the previous year.
Our margins were impacted due to multiple macroeconomic developments -
among them reduction in copper prices which lead to destocking of
cables & wires by distributors and subsequent inventory losses. Planned
spending for enhancing our manpower in key functional areas of
production and marketing along with expansion of our customer service
networks also had its impact on our margins. Our PAT remained flat
y-o-y basis.
Higher depreciation charges and increased tax outgo impacted the PAT
margin. As you may be aware, some of the plants availing tax free
status during last five years have now come partly under tax. Our
average tax rate has gone up from last year''s 26 per cent to 30 per
cent.
Consistent with our progressive dividend policy, the Board of Directors
have recommended a final dividend of Rs.4.50 per share for FY14-15.
Key Initiatives in FY14-15
During the year when the market became unfavourable, we turned inwards
to further improve our operating efficiencies. By deploying rigorous
internal controls, inventory management and tight control on
receivables, we managed to increase our cash flows substantially. Our
working capital cycle marked an improvement by 6 days during the year.
During the year we launched our premium variant of the electrical water
heater Pebble across India. Pebble comes with engineered polymer
anti-corrosion technology for 100 per cent rust resistance. The product
was widely accepted by consumers and contributed considerably to our
revenue growth. Further leveraging on our brand and distribution
network, we expanded market for our cook tops and mixer grinders by
launching them in few other southern states as well.
Customer care is akin to our vision to make V-Guard a trusted household
name. In order to improve the quality of our customer service and
ensure sustainable growth, we invested in a franchise-based after sales
service system, upgraded the IT infrastructure and also setup a unified
third-party call center.
With the involvement of an external consultant, we are in the process
of making our supply chain leaner and more robust. This new SCM
initiative will, among other benefits, help to maintain optimal
inventory at various stock points, there by bringing down inventory
costs.
Governance
We continue to comply fully with all governance, statutory, reporting
and social norms.
The Board is responsible for the leadership, control, development, risk
management and long-term success of the company. V-Guard has its own
unique culture and ethos established since its inception, to achieve
the highest standards of governance through honesty and openness in all
business dealings. Our Board comprises of a diverse mix of experienced
individuals, chosen for their relevant skill sets, valued for their
independent mind-set and collectively supporting the management on all
corporate strategic initiatives.
Corporate Social Responsibility
Social responsiveness and community development is embedded into
V-Guard business model beyond compliance and regulatory compulsions.
Corporate Social Responsibility is an integral part of our culture and
we are committed to fulfill our responsibilities as a member of the
society and community. V-Guard continues to contribute towards
improvements in the field of education, healthcare, disaster relief and
environment. Our CSR team, guided by the Board constituted CSR
committee, has implemented various social development initiatives
across India. In the year FY 14-15 we spent Rs.164 lakhs towards these
initiatives.
Outlook
As on today, India has one of the lowest per capita in consumer
durables usage. It is estimated that by 2025 India will become the 5th
largest consumer durable market in the world. With the government''s
focus on rural electrification, the usage is expected to increase
across the rural heartlands in India. With a healthy product mix,
pan-Indian branch, distributor, retail and service networks, we are in
full readiness to capitalise on the emerging opportunities.
We will continue to focus on increasing our retail network in non-south
states and thereby increase revenue contribution from non-south
distributors. A strong foundation has been laid in the non-South
markets through aggressive brand building initiatives which will be
continued.
The focus will be on turning around the underperforming states,
resolving product mismatches in these states and strengthening the
sales teams.
India is poised to embrace GST, a long cherished uniform tax regime
soon. With the implementation of GST, multiple levels of taxation is
expected to come down. It could also reduce cost of carrying inventory,
since businesses can manage with lesser number of warehouses. It will
also reduce the time and cost taken for movement of goods across the
country, bringing down logistic cost. V-Guard is poised to take
advantage of GST implementation with our advanced technological as well
as operational capabilities.
Let me assure you that today V-Guard is a more resilient company with
a well nurtured product and process advantage. While we remain
committed to increasing the shareholder value, we are equally
committed to our responsibility towards corporate governance,
society and environment.
I would like to express my sincere thanks and gratitude to all
stakeholders including our esteemed shareholders, valued customers,
vendors, banks, Central and various State Governments for the faith
reposed by them in the company.
With Best Wishes
Kochouseph Chittilappilly
Chairman
